Credit repair companies say, if you’re thinking of buying a home, the general rule of thumb is that you must have at least a 20 percent down payment before you even think about getting a loan. However, with home prices being what they are today, many people can’t afford even that.
According to a recent survey of 10,000 American adults, two out of three people said that getting the money for a down payment was the biggest hurdle they faced when buying a home.
The good news is that this doesn’t mean you’re out of luck. There are many down payment assistance programs that can help you so you can get the home of your dreams.
In this article, we look at how down payment programs work, how to get assistance, and who is eligible for help.
How These Down Payment Assistance Programs Work
In most cases, a down payment assistance program is funded by the government, whether it be state, local or federal. However, sometimes these programs are available from non-profit or charitable organizations as well. If you’re thinking about getting help from the government for your down payment, you’ll have to apply and see if you’re eligible.
The first things agencies look at when considering people for down payment assistance are the the potential borrower’s income and financial obligations. For example, the Texas State Affordable Housing Corporation (TSAHC) is one agency that offers down payment assistance, and they state that their income requirements vary according to your profession, the size of your family and the county you live in. Also, they will take your credit score into consideration as well. Keep in mind that every state has different rules regarding who’s eligible, but in most cases, agencies look at similar factors regarding each person’s eligibility.
Another thing to keep in mind is that each program treats the money you get different. In some cases, the money you receive could be from a grant, an interest-free loan, or another type of loan that you have to pay off. Also, in many cases, you have to agree to live in the house for a period of time if the money you received came via a grant that varies from agency to agency. And, if you received a loan and you decide to move, you’ll have to pay off that loan prior to selling and moving.
Types of Programs
As mentioned, these down payment assistance programs come from a variety of sources, including:
- Grants — The assistance you get through a grant doesn’t have to be paid back.
- Second Mortgage Programs — This type of assistance is usually available as a 0% interest second loan with repayment terms that can range from 5 to 30 years.
- Deferred Programs — With this program, the repayment is delayed until the buyer meets particular criteria, which could be when the buyer sells or moves out of the home.
- Forgivable Second Mortgages — With this program, you may be forgiven some or all the money you received for your down payment.
The good news for home buyers is that there are over 2,000 down payment assistance programs available throughout the country, so whichever state you’re in, help is available for you.
Who Is Eligible?
In most cases, down payment assistance programs are only available to first-time home-buyers. For example, My First Texas Home program is open to home buyers from virtually all professions, first-time buyers and veterans. In contrast, the TSAHC says they offer assistance to prior homeowners as well a first-time buyer. Also, the 5 Star Texas Advantage Program doesn’t have a restriction on first-time homebuyers, but those taking advantage of this program will have to complete an online course to be considered.
Also, while many of these programs are only available to first-time buyers, it’s important to keep in mind that first-time homebuyer is generally defined as someone who hasn’t owned a home in three years. So if you owned a house once, but are now renting a home or apartment, you may still qualify as a first-time buyer.
The good news is that, regardless of your situation, there’s usually a program available to you.
What About Credit?
Typically, these down payment assistance programs are geared toward people who wouldn’t otherwise be able to afford a down payment, which includes people with bad credit. However, if you do have bad credit, it’s still a good idea to start rebuilding your credit as much as you can before you apply for one of these programs. You can do that by making sure your bills are paid on time and to pay down your debts quickly.
Owning a home is part of the American dream, and down payment assistance programs are helping that dream become a reality for thousands of people every year.